While Congress and the Banks Play “He Said, She Said,” You Still Can’t Get a Loan. Why?

Recently, Congress called in the executives from many of the banks that received government bailout funds and asked them why they weren’t lending. The bank executives for their part claimed that their banks were lending. Aside from wondering whom to believe, most business owners are just left wondering why they still can’t get a business loan.

Is the “Shadow Banking System” to Blame?
One potential cause is the contraction of the “shadow banking system.” Non banking entities, such as insurance companies, money market funds, and institutional investors that supplied credit to large corporations have pulled out of the market. That has caused corporations to look to banks to supply credit, and “bank capital isn’t big enough to fill in for the lack of supply,” said Rick Spitler, managing director at the New York City-based consultancy Novantas, which focuses on financial institutions. Why You Can’t Get a Loan, CNNMoney.com (February 17, 2009).

Is it Really the Banks?
Banks claim they are making business loans, but many say they are also trying to manage risk in the current credit climate. Or as Wells Fargo explains, “[a]ll our lending decisions are based on doing what is best for our customers, our company and investors.” Why You Can’t Get a Loan, CNNMoney.com. Wells Fargo is not alone. Many banks are doing what they have always done during tough economic times – pulling back on all types of lending and trying to hold onto capital to help safeguard against further loan losses.

So who is an ideal candidate to borrow nowadays? “Someone who doesn’t need any money,” said Charles Wendel, who runs a Connecticut-based strategic consulting firm that advises banks.

Some things never change.

Are You Looking for Funding in the Right Place?
While not exactly a “shadow banking system,” alternatives for business loans and restaurant loans do exist. One such alternative is Advance Restaurant Finance, LLC. (ARF). ARF is a licensed lender that has been making restaurant loans and business loans to the hospitality industry for almost a decade. With business loans and restaurant loans up to $1,000,000 per location available, more and more hospitality merchants are turning to ARF if their banks turn them down. You may want to expand your universe of options when seeking funding.

If you can’t get a business loan, don’t think you are the only one. According to CNNMoney.com:

• Chris, a vice president at a Kansas City-based retailer with more than 500 employees says his business is now struggling to find a lender after Bank of America pulled its credit line.
• Another small business owner who operates a homebuilding firm just outside of Savannah, Ga., said his company was denied financing by five different lenders, including regional giant SunTrust, for a loan to purchase a 1.6-acre piece of property.

Call an alternative lender and explore your options. Money is out there. Sometimes you just have to know where to look.

© 2009 Advance Restaurant Finance, all rights reserved